Revenue drops as city declines: Greenwich-based Alinda deals business

Bloomberg News

Published 9:56 pm, Wednesday, September 4, 2013

American Roads, operator of the mile-long Detroit Windsor Tunnel linking the U.S. to Canada, won court approval of a turnaround plan to shed $830 million in debt from swaps and bonds issued after a private-equity buyout.

The deal transfers ownership of American Roads from the Greenwich-based investment company Alinda Capital Partners, which holds stakes in London's Heathrow Airport and other infrastructure projects, to the financial insurer Syncora Guarantee in exchange for $334 million in swap liability.

Under the plan, holders of $496 million in bonds due in 2026 will receive nothing, though their rights to insurance claims will remain intact.

Lifland ruled Aug. 28 that an ad-hoc group of the bondholders didn't have legal standing in the case and couldn't object to the reorganization.

The ruling was issued about a month after Detroit-based American Roads sought court protection from creditors, blaming the city's falling population, reduced traffic, natural disasters, increased federal regulations and lower-than-forecast revenue from four toll roads in Alabama.

American Roads filed the July 25 bankruptcy petition because it couldn't meet obligations under the swaps and bonds, which were issued in 2006 as part of a financial restructuring after the acquisition by Alinda, court filings show. Alinda owns infrastructure projects in North America and Europe that serve about 100 million people a day, according to its website.

Alabama tolls

When the debt was issued, traffic on the company's toll roads in Alabama was projected to increase steadily. Instead, it fell as much 8.6 percent through last year, according to a description of the case filed by lawyers for American Roads.

The Chapter 11 filing wasn't related to the city of Detroit's bankruptcy filing, American Roads Chief Executive Officer Neal Belitsky said in court papers at the time. Detroit filed under Chapter 9 on July 18, listing $18 billion in debt.

Syncora is also involved in Detroit's bankruptcy in a dispute tied to a proposed $253 million swaps settlement that would save the city about $50 million a year.

The judge overseeing that case ruled Aug. 28 that Detroit's casino tax revenue put up by the city as collateral is protected by U.S. law and can't be frozen by Syncora.

American Roads negotiated its reorganization with Syncora for months before the bankruptcy, allowing it to submit to the court a pre-packaged Chapter 11 plan at the time of filing.

Syncora, the only creditor allowed to vote on the plan, is the counterparty to the swaps and owns a "significant" portion of the bonds, according to court papers.

Revenue declines

The tunnel operator blamed traffic-related revenue declines from the toll operations as a result of an economic recession, volatile gas prices, reduced travel and lower discretionary spending. Detroit's population, which peaked at 1.85 million in 1950, has since dropped to about 700,000.

American Roads said it paid about $35 million in 2012 to service its debt while in the same period generating about $14.2 million in earnings before interest, tax, depreciation and amortization.